TMI Blog1970 (2) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : For a number of years prior to the assessment year 1952-53, the respondent-assessee, being the owner of about 93 acres of land situated at Phaltan on the southern and/or right bank of river Nira, cultivated sugarcane on his lands. He owned three heavy horse power engines for crushing sugarcane and converted sugarcane into jaggery for sale in the market. He was assessed to income-tax in respect of the income-from the sales of jaggery under the Income-tax Act, and had not claimed exemption in respect of this income on the footing that it was agricultural income. In respect of the income from sales of jaggery for the assessment years 1952-53 and 1954-55, being the accounting years S. Y. 2007 and S. Y. 2009, he claimed that the income was agricultural income ; and that he was entitled to exemption from income-tax in respect thereof having regard to the provisions in section 2(1)(b)(iii) read with section 4(3)(viii). This exemption was refused to him and in Appeals Nos. 1591 and 1592 of 1956, the Income-tax Appellate Tribunal by its order dated August 10, 1956, held that proper attempt had not been made to ascertain the truth whether there was in fact a market for the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stated as follows : On the southern bank of river Nira, within a radius of 15 miles from the Phaltan Sugar Factory, there were in all 419 sugarcane cultivators, big and small. These cultivators owned 5,253 cultivable acres, 3,109 aces from sugarcane blocks and on a rotation basis only 1,036 acres were utilised for growing sugarcane. The above acreage excluded farms on lease by the Phaltan Sugar Works Ltd. (hereinafter referred to as " the factory "). This factory cultivated on its own at an average sugarcane on about 2,000 acres of land. The factory was situated at a distance only of 7 miles from the assessee's lands and there were trolley lines put up by the factory which were passing from the distance of about one mile from the assessee's factory. The factory had made purchases between 1946 and 1955 of different quantities of sugarcane--about 11,000 tons for five of the above years, about 36,000 tons in 1948 and 1951 and 24,000 tons in 1953. In the above 10 years the factory had by itself cultivated and produced sugarcane, which approximately varied between 65,000 tons and 88,000 tons. The factory had crushed sugarcane in the above 10 years in the quantities which were approx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory had refused in the past to purchase sugarcane from the assessee himself and neighbouring farmers. He relied upon the letters brought on record in the above connection. His case was that the factory had been purchasing sugarcane only from sugarcane cultivators within the factory area under contracts and by mutual arrangements with Government farms in Padegaon and one Radheshyam agarwal. He pointed out that according to the tariff report and the facts mentioned therein the season for the working of the factory would only be of 120 days and 20 days thereof would be holidays. According to him, the average yield of sugarcane per acre was not 30 tons as found by the Income-tax Officer, but far exceeded even 45 tons. He gave figures of produce disclosed by different factories in his affidavit. He also pointed out that in spite of the crushing capacity being high, a sugarcane factory cannot purchase outside sugarcane in excess, as outside cane as well as factory cane is required to be cut before the 15th February each year. He pointed. out several facts in that connection. He further pointed out : " If nearness would have been a major factor, Phaltan Sugar Works would have purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is quality can be sent and sold. The mills buy their requirements at prices fixed by the Government or at such other prices at which sugarcane can be purchased according to their requirements. The existence of a mill, in our opinion, does not mean that there is a market for the sale of sugarcane. A market indicates a number of purchasers and sellers. Sugarcane is not like wheat or rice which can be sent to the market and kept there for months. As we have stated hereinabove, that sugarcane loses its content if it is kept for even a few days. The only manner in which sugarcane can be sent to market is, in our opinion, to convert it into gur. This has been the method ordinarily employed by a cultivator in this country from times immemorial. We have examined the evidence on record.... If the mills would refuse to buy sugarcane, the poor agriculturist has no other alternative but to convert it into gur. Whether he does so at a profit or loss is of no consideration to him. That is the only manner in which he can keep his crop in a saleable condition for any reasonable length of time." Mr. Joshi for the revenue has challenged the correctness of the above findings and has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to make a finding that a market existed for sale of the sugarcane crops of the assessee. He altogether denied the second contention made on behalf of the revenue and in that connection largely relied upon the reasoning of the Tribunal which we have quoted above. He further submitted that the contention is made beyond the scope of the questions raised in the reference. If this question had been raised before it, the Tribunal could have recorded its own explanation in connection with the contention. He repeatedly drew our attention to various pieces of evidence which could all have been included in the judgment of the Tribunal so as to explain in a better manner the recorded reasoning for the finding that the factory was not a market available for sale of the sugarcane crops of the assessee. The question of the true construction and effect of section 2(1)(b)(iii) read with section 4(3)(viii) arose in the case of Brihan Maharashtra Sugar Syndicate v. Commissioner of Income-tax. The first contention made on behalf of the respondent in that case was that the High Court under, section 66 had no right to go behind the findings of fact made by the Income-tax Appellate Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law by a misunderstanding of the statutory language or otherwise, their determination cannot stand. Lord justice Radcliffe observed: " If the case contains anything ex facie which, is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances too the court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination. " Relying upon the above observations, Mr. Joshi for the revenue has with some emphasis submitted that the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., as sugarcane. In that connection, there is no dispute between the parties that the quality of the sugarcane produced by the assessee was such as was not fit for chewing. This must lead to the conclusion, as observed in the case of Brihan Maharashtra Sugar Syndirate v. Commissioner of Income-tax that this variety of sugarcane was not usable in its natural form. Apparently, this variety of sugarcane can only be sold if there was a purchaser who wanted to use it for converting it into sugar and/or jaggery by applying manual and/or mechanical process. Having regard to the above situation, the whole of the burden of evidence tendered on behalf of the revenue was that a purchaser in the shape of the Phaltan Sugar Works was always available for sale of the sugarcane produce of the assessee in its natural condition. The whole of the effort of the assessee in tendering evidence on his side was to prove that this single purchaser was useless to him for sale of his sugarcane produce in the assessment years. As already mentioned, a plethora of evidence was recorded on both sides towards supporting their cases as mentioned above. The first contention made by Mr. Joshi that there was no evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated several facts relating to this single available purchaser which induced the Tribunal to hold as a matter of fact that, on the evidence on record a finding could not be made in favour of the revenue that the sugarcane produce of the assessee was saleable to its purchaser. Now, it is true that the Tribunal's order is compact and short in its compass and, therefore, all this has not been discussed in a large way for the benefit of a person who might critically desire to read it. To a large extent, the Tribunal's order, in its shortness, is admirable as it contains so much of reasoning in a few words as it would be difficult to draw up ordinarily. The Tribunal has indicated the following relevant facts: " The sugarcane grown by the assessee in his farm cannot be used for chewing. The only other use to which it can be put is the production of sugar... " Sugarcane is a crop which has certain peculiarities. If sugarcane after being cut is not crushed within 48 hours, it starts losing its sugar content. ." Now, each of these facts is mentioned to indicate that the produce of the assessee was such as could not be stored and retained for a long period of time. If the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apprehend, desired to indicate that in this case there was a single purchaser and it had crushed such quantities of sugarcane in the assessment years as it desired and it had not been proved that larger and better quantities were desired to be purchased by this purchaser and had not been sold to it by outsiders like the assessee. Now, the arguments advanced by Mr. Joshi, therefore, by culling out the sentences as quoted above on which he relied, do not represent the true effect of the reasoning of the Tribunal. In this very connection, the Tribunal pointed out the facts that sugarcane produced could not be stored for a long number of months like wheat and rice and the only alternative to the failure of purchases to be made by the factory in question for a cultivator like the assessee was to convert its sugarcane produce into gur. Apparently, the Tribunal was not satisfied that the single purchaser factory indicated by the revenue was in a position to absorb and purchase produce of sugarcane available from the sugarcane plantations situated on the north and south banks of the river Nira and/or even the south bank of the river Nira. The burden that the revenue had undertaken was to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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